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The China Securities Regulatory Commission and the Securities and Futures Commission today approved the launch of the Shanghai-Hong Kong Stock Connect (Stock Connect), officially allowing mutual trading access between the Shanghai and Hong Kong stock markets from November 17. The Stock Connect was first announced in April of this year but it has taken seven months to prepare the necessary trading and clearing rules, the daily and aggregate quota mechanisms and other regulatory and operational arrangements. A series of market rehearsals have taken place and numerous market training and investor education programs have been conducted.

The Stock Connect marks an important milestone in the liberalization of China’s capital account. It will propel the development of the offshore Renminbi business in Hong Kong and continue to strengthen the city’s position as the largest offshore Renminbi center in the world. Market participants are speculating that this is just the first step. Should the scheme prove to be a success, there is a chance that regulators may extend it to cover the Shenzhen stock market.

The Stock Connect points to higher stock liquidity and stronger demand for financial sector services in Hong Kong. This will lead to improved business prospects for banks, fund houses, securities and wealth management firms as well as professional services firms. CBRE sees a growing need for office space from firms in these industries.

In addition to the organic growth of established firms, Hong Kong is expected to host more mainland Chinese financial sector companies, a trend which has emerged in recent years. In addition, Hong Kong’s improved access to Chinese capital markets will attract more overseas companies to set up offices in the city to support fund raising activity and geographical expansion, creating strong demand for office space in the Central CBD and surrounding districts. Whilst these new set-ups may not initially have large space requirements, they could eventually expand to become larger tenants should they successfully grow their business in Hong Kong.

Although the global economic environment remains uncertain and multinationals are still cautious towards business expansion, the Stock Connect should be able to provide some impetus for the Hong Kong office market both in 2015 and the medium-term.

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Disclaimer:

Neither CBRE nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.